Irvine's City Council will decide Tuesday what to do with a $9.3-million surplus from last fiscal year's $136-million budget.

Despite projecting a $7-million budget gap for the 2011-12 fiscal year, rollover from previous years' surpluses, $4.7 million of unprotected revenues and $3.8 million of budgeted money left unspent added up to the millions left in city coffers, according to a staff report.

A sizable chunk of that came from rebounding sale taxes, which took in $2.6 million more than the city projected. That 8% increase over last year still lags about $6.6 million behind peak levels in fiscal year 2007-08.

The $9.3 million is left even after Irvine replenished its contingency reserve fund to a total of more than $20 million.

As part of what to do with the surplus, the city's Finance Commission recommended the council boost that reserve's target from 15% of the budget to 20% over the next three years.

Staff recommended the council send $2.4 million to an insurance fund, designate $1.9 million for future infrastructure repairs like street repaving, and dedicate $1.3 million to public facility improvements such as flooring and lighting repairs at civic centers.

Irvine also overcame an expected gap to produce a $14.4-million surplus in fiscal year 2010-11.

The majority of that money went to replenishing the contingency reserve fund. The council also voted 3 to 2 to give employees bonuses totaling $450,000.

The City Council meeting begins at 4 p.m. Tuesday in the City Council Chambers at City Hall, 1 Civic Center Plaza.

jeremiah.dobruck2@latimes.com

Twitter: @jeremiahdobruck